Financial News

Daily Picks Thursday: "2019 is setting up to be a dangerous period for the economy"

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Here are summaries from a selection of articles we read today:

Chart of the Week: The Rise of Corporate Giants

From: https://blogs.imf.org/2018/06/06/chart-of-the-week-the-rise-of-corporate-giants/

IMF chart markups in advanced economies
  • The chart shows average markups on goods and services across all companies, comparing pricing in advanced and emerging and developing countries. A markup is how much a company charges for its products compared with how much it costs to produce an additional unit of the product. This provides a measure of market power.
  • Rising corporate market power has been blamed for low investment despite rising corporate profits, declining business dynamism, weak productivity, and a falling share of income paid to workers.
  • Some rethinking of policy may be needed to maintain fair and strong competition in the digital age.
  • The problem is that corporate market power is hard to measure and common indicators such as market concentration or profit rates can be misleading.
  • Markups among advanced economies have significantly increased since the 1980s, by 43% on average, and this trend has accelerated during the present decade.
  • Among emerging market and developing economies, the rise of markups is much more moderate, a 5% increase on average since 1990.
  • Markups in advanced economies is mostly driven by “superstar” firms that managed to increase their market power.
  • The IMF is concerned that trend will continue with the relationship between investment and innovation being negative when market power becomes too strong.

Trade clash: EU to hit US with $3.3 billion in tariffs next month

From: http://money.cnn.com/2018/06/06/news/economy/european-union-tariffs-united-states/index.html

  • The United States and the European Union trade just over €1 trillion ($1.2 trillion) in goods and services each year.
  • The tariffs will include denim, orange juice, bourbon, motorcycles, peanut butter, motor boats and cigarettes.
  • If the dispute is not resolved the EU will hit another $4.3 billion worth of exports in the next three years.
  • The value of goods targeted is a dollar for dollar response.
  • Industry experts warn that Trump may retaliate with more trade barriers including European cars.

The world's biggest hedge fund warns: '2019 is setting up to be a dangerous period for the economy

From: http://uk.businessinsider.com/bridgewater-associates-worlds-largest-hedge-fund-says-its-bearish-on-pretty-much-everything-2018-6

  • Bridgewater Associates is sounding the alarm on nearly every financial asset in 2019.
  • "Markets are still pricing in Goldilocks conditions, compounding the risks" - Bridgewater Associates.
  • "2019 is setting up to be a dangerous period for the economy, as the fiscal stimulus rolls off while the impact of the Fed's tightening will be peaking and since asset markets lead the economy, for investors the danger is already here." - Bridgewater Associates.